TaxTMI 
TaxTMI 
2024 (7) TMI 840
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.... Majorly, Assessee deals in business areas, namely Cyberoam, Crestel and 24Online, 24Online. Cyberoam business of the Assessee has been demerged into another company called Cyberoam Technologies Private Limited with effect from AY 2012-13. The name of Cyberoam Technologies Private Limited as on date has been changed to Sophos Technologies Private Limited. Now, the assessee-company is merged with Sterlite Technologies Ltd. 2.1. The Assessee filed its return of income for the A.Y. 2011-12 on 29th November 2011 declaring total income of Rs. 18,70,45,719/- under the normal provisions of the Act. Thereafter, the return was selected for scrutiny assessment and notice under section 143(2) of the Act was issued. In response to the said notice, the Assessee submitted various details, explanations and submissions during the course of assessment proceedings. The Assessee received the assessment order dated 25th March 2015, under section 143(3) of the Act for the A.Y. 2011-12, wherein the Deputy Commissioner of Income-tax, Circle-2(1)(1) ("the AO") made certain additions disallowances and determined the total income of the Assessee at Rs. 21,98,21,020/- as against the returned income of Rs.....
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....he country of Bahrain or the Middle East Asia geographical region, he adopted the loan transactions in US and Europe regions. Based on the said search, the average spread charged over LIBOR was taken as 338.93 basis points. The prevailing LIBOR rate was 0.53%. The TPO increased this spread by 100 basis points on account of country and foreign exchange risk and an additional 50 basis points towards country risk as the sovereign country rating of Bahrain was worse than USA. Accordingly, TPO computed the rate at 5.42% (0.53% + 3.3893% + 1% +0.50%). The TPO thus concluded that the Assessee had short-charged interest to the tune of 3.17% (5.42% - 2.25%) and made an addition of Rs. 2,26,243 to the amount of interest charged by the Assessee from its AE while passing the pricing assessment order. 5. The Ld.Departmental Representative (DR) contented that the assessee has not taken into account foreign exchange risk while adopting the rate of interest based on loan analysis. He pointed out the conclusion of AO that the sovereign credit rating of Bahrain is worse than USA. The DR contented that since the risk is more AO was right in adding more spread while making an adjustment. 6. The ....
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....its reliability and appropriateness. (vi) That, the Ld.CIT(A) has thoroughly addressed and resolved the issues raised, aligning with the principles of fair benchmarking and appropriate risk adjustments. 7.1. Based on the above findings, we uphold the Ld.CIT(A)'s order, thereby dismissing the TPO's adjustment of Rs. 2,26,243/-. Thus, Ground Nos. 1 and 2 of Revenue's appeal are dismissed. On Ground No.3 8. This ground relates to disallowance of Product Certification Expenses of Rs. 60,57,180/- paid to non-resident on account of non-deduction of withholding tax u/s 195 of the Act and non-genuineness of the expenditure. 8.1 The facts are such that the assessee paid Product Certification Expenses as details below: Sr. No. Name of the Vendor Amount Rs. Country of Vendor 1 ICSA Lab 35,11,206 USA 2 Virtual Network Private Consortium 1,39,234 USA 3 West Cost Lab 12,21,396 UK 4 Network Test Inc 3,79,200 USA 5 Estech Co. Ltd 1,54,530 Korea 6 Kevin Gao 6,51,614 China Total 60,57,180 8.2. In this regard, the assessee submitted before AO that the company is re....
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....efinition of Fees for Technical Services as provided under the respective treaties. Further, in absence of fixed place of business of such parties in India, the payment made to them is not chargeable to tax in India even as business income. 8.6. Further, in relation to the payments made to ISCA labs, separate proceedings under section 201 of the Act had been initiated wherein the payments were held to be taxable. However, the Commissioner of Income-tax (Appeals) accepted the contentions of ETPL and held that such payments are neither taxable under the treaty nor taxable under the provisions of the Act. Copy of the said order was also submitted to the AO. Therefore, the company was not liable to deduct tax on payments made for product certification/ registration charges. 8.7. The AO was not satisfied with the reply and concluded that the expenses are not reasonable and genuine. He also concluded that since the income derived by these parties, to whom payment was made, is from the source in India, in terms of provisions of section 5(2)(b) of the Act, this income is deemed to accrue or arise in India and since the assessee has failed to withhold tax u/s 195(2), added back u/s 40....
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....judgments cited by the Ld.AR, particularly the Hon'ble Supreme Court decision in CIT Vs. Kotak Securities Ltd. (supra), which clarified that routine services not involving technical knowledge do not constitute technical services and it is mere in the nature of facility offered or available. For the sake of clarity, we produce relevant part of the judgment - "8. A reading of the very elaborate order of the Assessing Officer containing a lengthy discourse on the services made available by the Stock Exchange would go to show that apart from facilities of a faceless screen based transaction, a constant upgradation of the services made available and surveillance of the essential parameters connected with the trade including those of a particular/ single transaction that would lead credence to its authenticity is provided for by the Stock Exchange. All such services, fully automated, are available to all members of the stock exchange in respect of every transaction that is entered into. There is nothing special, exclusive or customised service that is rendered by the Stock Exchange. "Technical services" like "Managerial and Consultancy service" would denote seeking of services t....
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....01, QS 9000, etc.). The Auditor only assesses whether or not the clients manufacturing practices meet the International Requirements or not. The Auditor is not permitted to provide any technical assistance or advice to the company. Based on his findings, the auditor prepares a report stating compliance for the "Certification Body" in Munich. The Certification body issues the Certificate after reviewing the report for compliance. Audits are carried out in various stages. Pre-assessment Audit A Pre-assessment audit is conducted to evaluate the feasibility of a successful certification audit. The company is informed whether or not they are ready for a Certification audit. Certification Audit The certification audit is conducted to assess the clients' conformity to an International Standard. A report is prepared and sent to Germany for review & issue of the Certificate. Surveillance Audit The above certificate is valid for 3 years. Audits are carried out every 6 months (or 12 months) to assess if the company is continuing to meet the International standard. Reports of the audit are sent to the "Certification Body" in Germany for....
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....a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work, including cinematograph films or films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience. (4) The term "fees for technical services" as used in this article means payments of any amount in consideration for the services of managerial, technical or consultancy nature, including the provision of services by technical or other personnel, but does not include payments for services mentioned in Article 15 of this Agreement. (5) The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for technical service arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed ....
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.... 10.3 Now, coming to the print out of the website of the assessee, provided by the Learned Senior DR, it is seen that the first kind of services mentioned therein, relates purely to audit work of ISO certification. Besides this, there are host of other services mentioned, which upto some extent can be considered to be in the nature of consultancy services. However, whether the assessee has been carrying out other services as mentioned therein besides audit for certification of ISO, is not borne out from the records as the same has neither been examined by the Assessing Officer nor by the CIT(A). Both the authorities have simply observed that even the audit work and certification work comes within the realm of FTS. From the print out of the website, it is also not very clear as to whether these kind of services were also rendered in the year 1997-1998. On the contrary in the IAF guidance note provided by the learned AR, it has been clearly prohibited that the auditor will not give any prescriptive advise or 17 ITA Nos : 4944/02, & 7588/04 consultancy as a part of an assessment, which has been noted by us in the foregoing paragraphs. This goes to prove the assessee's contention ....
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....rovision of royalty expenses. However the same is not immediately payable to the third party vendor as the end user has not activated the software. The Appellant during the course of proceedings has submitted that Hon'ble Ahmedabad ITAT in case of Saira Asia Interior Private Limited vs ITO [2017] [ 79 Taxmann.com 460 ] has held that withholding tax liability under the Act is an indirect liability and is wholly dependent on the existence of tax liability in the hands of the payee / recipient of income. When income embedded in a payment is not taxable under the Act, the tax withholding liability does not get triggered at all. The withholding tax provision cannot be applied in vacuum and it should be read in conjunction with the charging provisions under the Act, read with the provisions of the tax treaty. Under the provisions of the tax treaty, taxability of royalty is dependent on payment by a taxpayer and receipt of the same by the Non-resident payee. Furthermore, the term "royalties" means payments of any kind "received". Thus, unless the royalty amount is actually received, taxability under the DTAA does not arise. The Appellant has procured software from the vendors located ....